Costco - Another "Death" Cross?   Monday, June 14, 2010
By Gibbons Burke
 Costco shares (COST) dropped 0.2% on Friday to close the week with a 2.4% gain at $57.52. It was a 'fake decline' pattern, which happens when the stock closes lower on the day relative to the previous close, but rallied relative to the day's open. From a trend perspective the stock has been in a longer-term down trend, and is below the 200, 100, and 50 day averages, but last week it has been gaining strength in the shorter term, crossing above the 20, 10 and 5 day average prices. It's not completely in the fangs of the bear - closing in the upper third of the 52-week range.
Most notably, however, the stock experienced a so-called "Death Cross" event, where the 50-day average crosses below the 200-day average. This signal has been getting a lot of ink lately from folks who believe that this is a very bearish sign, but as we have seen, time and again, for many stocks, this has more often been a good time to buy.
 Q: How has COST performed in the past after a death cross? A: According to the 12 previous occurrences of this event, EventEdge indicates that COST has shown a somewhat bullish edge that peaks 36 trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Friday, 11 June 2010) is Monday, 2 August 2010. COST rallies in 83% of the cases (10 of 12) by an average of 15.2% relative to the close on the event date. The average of the 2 declines is -12.8%. The overall return of the 12 cases is 10.5%, which, based on the close of COST on the event date ($57.52), provides a target price of $63.56. Click here to see more details about this trading idea in EventEdge®. Gibbons Burke is editor of MarketHistory.com.
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| | Let variable values:
@ = GII.COST.NASDAQ
theEvent = IF
50 value average of @ crosses below 200 value average of @
THEN 1
ENDIF
Date Day t+5 t+10 t+15 t+25 t+36
01/12/1996 Fri -7.8 -5.5 0.0 10.9 12.5
10/06/1998 Tue 1.4 22.4 18.6 26.1 34.2
09/09/1999 Thu -6.8 -1.7 0.6 10.3 12.2
06/19/2000 Mon -0.4 6.8 11.1 -1.0 13.1
05/11/2001 Fri 0.8 5.9 8.5 18.6 18.7
09/28/2001 Fri -0.5 7.9 9.8 13.0 20.7
05/06/2002 Mon -0.5 1.8 -4.4 -1.4 -6.5
10/01/2003 Wed 2.0 4.1 4.9 8.0 5.7
04/26/2005 Tue 1.1 3.3 5.3 9.5 10.6
09/07/2006 Thu 5.8 6.5 6.1 14.2 12.3
04/15/2008 Tue 3.6 8.0 10.5 8.6 11.8
09/11/2008 Thu -3.0 -6.2 -12.0 -17.9 -19.0
06/11/2010 Fri NaN NaN NaN NaN NaN
Avg -0.4 4.4 4.9 8.3 10.5
AvgPos 2.4 7.4 8.4 13.3 15.2
AvgNeg -3.2 -4.5 -8.2 -6.7 -12.8
PctPos 50.0 75.0 75.0 75.0 83.3
PctNeg 50.0 25.0 16.7 25.0 16.7
Maximum 5.8 22.4 18.6 26.1 34.2
Minimum -7.8 -6.2 -12.0 -17.9 -19.0
StdDev 3.9 7.5 8.0 11.1 13.3
ZStat -0.1 0.6 0.6 0.7 0.8
Variance 15.4 56.3 64.7 123.4 176.0
13 Occurrences | |
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